Differences Between the Job Order Costing and Process Costing

Discuss the differences between the Job order costing and Process costing?

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Job order costing is a cost allocation method used for unique, custom-made products or services, where costs are tracked for each individual job or project.

Process costing is a cost allocation method applied to standardized, continuous production processes, where costs are averaged across identical units produced.

There are some differences between job order costing and process costing as illustrated in the table below.

Job order costing Process costing
It is used for unique products It is applied in cases of standardized products
It is effective for small production runs It works best in large production runs
A lot of record keeping is required to charge time and materials to specific jobs Not much record keeping because it aggregates costs
The approach can be used for customer billing because it details exact costs It is not used for customer billing purposes.
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August 08, 2023